Austin utility customers get hit with legal bill on top of $54 million contract

City of Austin taxpayers have spent $189,439 on fees for lawyers to study the possibility of getting out from under a $54 million-a-year contract for biomass-produced energy that isn’t being produced.

Almost six years into a 20-year contract that even its former champions say was a bad deal for the city and Austin Energy customers, the results of the legal study are inconclusive.

“Entering into the biomass plant contract was a big mistake for Austin,” Austin Mayor Steve Adler said in a statement he issued for The Texas Monitor. “The Council and I have asked questions of the City Attorney and Austin Energy. We’ve not gotten final answers.”

As The Texas Monitor reported on May 7, city and Austin Energy officials have for years kept details of the contract a secret, per an agreement with Southern Power, operator of the Nacogdoches Generating Facility near Sacul.

When The Texas Monitor asked the city under the Texas Public Information Act to provide all documentation pertaining to the legal fees, the city’s Law Department responded with two bills totaling $211,610. The $189,439.44 paid for attorneys for Gibbs & Bruns LLP to examine the current contract, and another $22,171 paid for Lloyd, Gosselink, Rochelle, & Townsend, P.C. attorneys to study a joint research project of the Nacogdoches and Fayette Power Plants.

Neither Adler nor the Law Department provided a breakdown of what taxpayers got for their investment in the legal advice Adler first called for two years ago. “The lawyers aren’t discussing this publicly. That’s all I know,” Adler’s spokesman, Jason Stanford, told The Texas Monitor.

Austin Energy and Southern Power officials also have chosen not to discuss the contract with The Texas Monitor.

The Nacogdoches plant was the largest biomass plant in the country when it was completed and ready to operate in 2012. It was also already rendered obsolete by the hydraulic fracturing revolution that produced natural gas in such abundance that it cost a fraction of what it would to produce energy by burning biomass materials.

Austin Energy and city officials were aware of the fast-changing energy market as far back as 2008 when Roger Duncan — Austin Energy’s general manager at the time — presented a plan to aggressively increase spending to purchase wind and solar power.

Duncan added a biomass component to the plan, insisting Austin Energy needed an alternative energy source that was available day and night, seven days a week. Despite a coalition of opponents made up of corporate and environmental interests and experts who predicted what has happened, the City Council approved. This allowed Austin Energy to fold into its customers’ monthly bills $128 million to build the plant.

The council was also unanimous in its approval of a 20-year guaranteed contract to buy energy from the plant, which is now operated by Southern Power, a subsidiary of the Southern Company in Atlanta.

For years Austin Energy customers have paid to comply with the contract, while the pant has produced no biomass energy in return. Taxpayers and utility customers in California, Minnesota and Virginia are paying out billions for bad biomass energy deals.

The Gainesville, Florida City Council late last year got out from under its $70 million-a-year contract by buying the biomass plant. Although the city paid $754 million for a plant valued at $450 million and signed on for another $400 million in interest, officials estimated utility customers would save $768 million by not paying out on the remaining contract.

Mark Lisheron has more than 30 years of experience in newspapers and was most recently the managing editor for Reason.com. He also served as deputy editor, national reporter and Austin bureau chief for Watchdog.org. He was the founding Austin bureau chief for the bureau's predecessor, Texas Watchdog, winning the First Amendment Award from the Society of Professional Journalists in Texas.

How stupid do you have to be to 1) sign a contract to pay $54 million per year for nothing, and 2) pay $189,000 to REVIEW a contract looking for a way out. Wow. In over 20 years of practice I’ve never had a client that stupid.